Month: August 2021

NMDC

The brokerage has suggested buying this iron ore mining company’s stocks with a target price of Rs 220, as against the current market price of Rs 171, implying an upside of nearly 30% on the stock. According to Sharekhan, NMDC is a play on strong iron ore prices and volumes.

The brokerage expects a strong (13%) volume Compounded Annual Growth Rate to 42 million tonnes over FY21-23E and higher iron ore prices, which should result in a 12%/16% EBITDA/PAT Compounded Annual Growth Rate over FY21-23E to Rs 111 billion and Rs 83.5 billion, despite a 22.5% premium levy on iron ore sales.

“We have factored in iron ore fines/lumps prices of Rs 5,500/Rs 6,400 per tonne in FY22E and Rs 4,500,Rs 5,200 per tonne in FY23E,” the brokerage has said.

“We value the stock of NMDC at Rs 220 per share on a Sum of The Parts Valuation basis, valuing the iron ore business at 5 times FY23E EV/EBITDA and the steel plant 25% of its book value. At the current market price, the stock is trading at 3.7 times its core Iron Ore Mining business and provides an attractive dividend yield of 13%. We reiterate our Buy rating,” the brokerage has said.

Bharat Forge

The company is one of the largest forging companies in the world and Motilal Oswal is pretty upbeat on the stock.

According to the management interaction with the company by Motilal Oswal, despite semi-conductor issues, it expects recovery to sustain in India and exports. The company also has a comprehensive Electronic Vehicles strategy covering power electronics, control electronics, motors, etc. for all Auto sub-segments (from 2W to Buses).

“It has a comprehensive Electronic Vehicles strategy covering power electronics, control electronics, motors, etc., for all Auto sub-segments (from 2W to Buses),” the broking firm has said.

“Bharat Forge’s strong performance in the first quarter of FY22 was driven by strength across segments as well as a better mix. While all core businesses are seeing sharp cyclical recovery, Bharat Forge diversified initiatives in aluminum, light-weighting, and e-Mobility are starting to fructify. We raise our FY22E consolidated Earnings Per Share by 16% to account for strong demand in the export markets, while maintaining our estimates for FY23E. We maintain our Buy rating, with target price of Rs 965 per share (28x Sep’23E EPS),” the brokerage has said.

Disclaimer

The article is informational in nature, which is taken from the brokerage report of Motilal Oswal institutional Equities. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article.

Why Motilal Oswal has a buy on the stock of Gujarat State Petronet?

Why Motilal Oswal has a buy on the stock of Gujarat State Petronet?

According to Motilal Oswal, over the last year and a half, Gujarat State Petronet’s volumes reached 38-39mmscmd in 1HFY20, there have been continuous investor concerns over the more than optimal utilization rate of its High Pressure Pipeline (HPP) grid.

With an adjustment in lieu of the new tax regime (of 25.17%), the tariff revision became a much larger concern, resulting in a huge de-rating in Gujarat State Petronet’s standalone value, the brokerage has said.

“Considering a gradual ramp up in volumes, with new terminal capacity additions in Gujarat, our sensitivity for a 5%/10%/20% tariff cut from current levels of Rs 34/MMBtu results in an EBITDA CAGR of 15%/13%/8% (on the back of 16% volumes CAGR over the same period),” Motilal Oswal has said in its report.

According to Motilal Oswal strict action against usage of industrial pollution would further increase the demand for gas and may result in higher transmission volume than that considered. Non-approval of capital expenditure proposed by GUJS, resulting in a sharp cut in tariff, remains the biggest risk, the brokerage has said.

“The company would turn net cash by the end of FY23E (v/s a net debt of Rs 6.6 billion in FY21), despite annual capital expenditure plans of Rs 7 billion. The stock trades at 16 times FY23E EPS and 10 times FY23E EV/EBITDA (owing to a huge rally in 45% in the last two months). We reiterate our Buy rating,” the brokerage has said.

Indian markets close at a new peak, time to be cautious

Though Indian markets closed at a new record high, it maybe time to be a little cautious on the markets.

“Equity markets are likely to continue with its strong positive momentum as the economic activities are expected to further pick up pace with the lockdown measures getting relaxed. The result season is now largely over with corporate earnings being in-line to better than expectations. Going ahead, we expect corporate earnings to improve further as economy opens up and improving vaccination trends.

We estimate Nifty EPS for FY22E/FY23E at INR725/INR862 which implies growth of 35%/19% respectively. Market has been witnessing a rotation from mid to large caps – a phenomena we believe could continue as well in the near term given the sharp outperformance of the broader market in the last 18 months. In terms of sectors we remain positive on IT, Metals, Cement, select BFSI, Consumer, Auto, and Healthcare space,” says Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.

Disclaimer

The article is informational in nature, which is taken from the brokerage report of Motilal Oswal institutional Equities. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article.